AMA: Dustin Shay — Impact with Intention

I work to break down barriers keeping entrepreneurship from making impact on issues that matter. Less than 15% of companies on the unicorn list are solving issues of access, agency, and quality in healthcare, education, housing, food/agriculture, or energy. Less than 15% of support goes to women-led ventures and less than 2% to black or LatinX founders in the US. Less than 25% of US VC goes outside of NY, CA, and MA.

The most successful entrepreneurs solve problems they know. Problems they’ve lived. And the biggest gaps in our society disproportionately affect women, people of color, and people outside of major cities. But the entrepreneurs from these communities often lack access to networks, guidance, and capital that they need to scale their solutions up.

It’s not that these founders lack drive or that the companies they’re leading aren’t good investments. It’s not that VCs are individually and intentionally overallocating their capital to a few people and places. There’s a combination of systemic barriers, implicit and explicit biases, and outdated approaches that keep society from unlocking the power of entrepreneurship.

I lead our Partnerships team now, securing funding and strategic partnerships with industry-leading corporations, institutional foundations, and inspired individual investors and philanthropists. Before this, I led several of our accelerator programs, including Village Capital’s first accelerator program focused on supporting financial health-focused ventures in 2014. That practice alone has now helped over 250 founders worldwide go on to raise over $1B and reach hundreds of thousands of people and small businesses with services that improve their economic mobility and financial resiliency.

Outside of VilCap, I’m an advisory board member of Left Tackle Capital, which is changing the demographics of VC. Right now, 92% of investment teams in early-stage VC are white men, and ~90% of investment goes to white men. We believe a more representative investment community leads to more equitable, resilient, and successful portfolios. We help first- and second-time fund managers who are women or PoC access the capital, community, and tools they need to launch their investment funds. We’re in the inaugural class right now, working with 12 amazing funds.

I work with Republic to help founders that the traditional VC leaves out find other paths to get the capital they need to scale. I’m specifically looking for companies that are solving systemic issues in economic empowerment, the future of work, or sustainability that are led by women or people of color.

Before all of this, I led investment teams with the Sorenson Impact Center, which made seed-stage investments in startups improving livelihoods worldwide. Before that, I was a barista and a student, and spent eight years slinging coffee at local coffeehouses and international chains.

I’m a nerd that enjoys video and board games, genuine conversations with people that are smarter than me, and cooking delicious (but ugly) food. I yell at podcasts about politics and spend far too much time inconsistently studying Japanese (I can hold simple conversations), trying to learn guitar (I’m terrible at it), watching stupid cartoon shows, or playing D&D.

You can ask me about anything. How to approach investors or strategic partners, what allyship means in the entrepreneurial and investment communities, what better accelerator programs look like, why the system needs to change, or what effects social distancing has on group dynamics in roleplaying games.

Dustin Shay
@cheryl-campos @kdoesvc has an interesting question. There are a ton of divides between business and policy, but most of them center around a straight up lack of entrepreneur perspective in the halls of Congress. It's shocking how little our senators and representatives are able to speak with actual business owners. Sure, they may hear from multi-million/-billion dollar organizations that can buy time, but early-stage startups, Main Street businesses, and single proprietors have almost no time to speak with their representatives in the government about the policies that impact their businesses the most. Each year, the Kauffman Foundation leads a "State of Entrepreneurship" mission to DC to speak more about the issues, gathering an incredible and exciting number of think tanks, local VCs, and NGOs to talk about the issues and bring them up to our lawmakers. Last year, the Village Capital team made sure that Clarence Bethea, founder of Upsie and a Village Capital program graduate, joined the trip to the Hill. Clarence has a growing, VC-backed business and, as an African American founder in the Twin Cities area, has a perspective that is very different from the typical coastal techbro. For the representatives that made the time to join the events the Kauffman Foundation put on, there was one phrase we heard repeated over and over, "This is the first time I've actually had the chance to meet an entrepreneur." It's shocking, but it's true. The best way to bridge the business and policy divide is to get entrepreneurs (not, and I can't stress this enough, NOT major industry leaders) onto the Hill and speaking with lawmakers.

Where can someone get VC101 info to learn about VC and how they work? Where can someone go to learn about VC for their businesses? How does one prepare a presentation for a VC? What instructions would you give someone who is just learning about VC?

Where can someone get VC101 info to learn about VC and how they work?All VCs are different. Period. If someone says they can tell you everything, they're lying. But there are some good resources for the basics - like whether a business is a good fit for equity-based investment at all (which is what most VCs deploy), common questions that VCs ask, etc. Here's a good blog post that should serve as a really, really beginner's style intro: https://startupsventurecapital.com/venture-capital-101-a-crash-course-ed80b0d87bd5

Where can someone go to learn about VC for their businesses?I'm assuming you're asking about how to find out which VCs are a good fit/likely to invest. The VC industry/space is wildly exclusive and famously opaque. The vast majority of deals are done "in network" and you'll see this stated explicitly on some VC funds' websites. There's literally zero accountability in this space, so VCs do whatever they want, mostly. That said, there are groups that are trying to make this a more navigable space. Village Capital, for example, has built Abaca (www.abaca.app). If you fill out the short evaluation, it will use that information to try to match you up to VCs (and also give you tips on how to present your business!).

How does one prepare a presentation for a VC?There are whole schools and programs and courses dedicated to this, but the core things that VCs want to understand are your value proposition (what problem are you solving and how), your model (how do you make money), your special sauce (how are you doing this differently/in a way no one else can), and your market (who are you solving the problem for and how much money they have to spent on that solution). Explain it like you're explaining it to a five year old. VCs don't want to think about it too hard until they're going through real diligence. Check out this collection of decks if you're interested: https://www.alexanderjarvis.com/pitch-deck-collection-from-vc-funded-startups/

What instructions would you give someone who is just learning about VC?Take the Venture Deals course from Brad Feld. It's free. It's well organized. It's really, really valuable. https://feld.com/archives/2020/02/venture-deals-online-course-spring-2020-registration-is-open.html

Dustin Shay
@alex-knighton That's a great question, and I think it gets at the heart of what's limiting impact investing today.

There are a couple of answers on that front:1. No one knows what impact means. Or, at least, no one can agree on it. For some investors, impact is negative screens. For others, only positive, measurable change on specific issues counts. For some, if you run an extractive, resource-based business but treat your employees well, that's totally fine. There are some metrics libraries out there (GIIRS, IRIS, etc) but none of them are being seen as the standard. Until we have a clear definition, we won't be able to create scores that measure impact on a case-by-case basis, let alone a blanket, 0-100 ESG score.

2. Measuring impact is hard, and not consistently rewarded. Imagine if someone gave you a one-time payment of $500 to pick up trash, but asked that every time you picked up trash that you saw on the street and threw it away, you also had to report on how much you threw away, what kind of trash it was, and where you did it. You'd NEVER do that report (or maybe you would, but not forever). It's the same problem for startups (and, at a totally different scale, for public companies). Not only is impact onerous to measure, it's not rewarded over time.

3. It's never enough. I call this the Starbucks Problem. Everyone sees a video about a turtle with a straw up its nose, and Starbucks says, "That's awful. Okay. No more plastic straws." Immediately, consumers and media say, "Wow, way to go Starbucks, what about the rest of your products? You think this is enough?" and Starbucks has a really mixed PR result. Meanwhile, McDonald's and every other fast food place do nothing, spend nothing, and see no change in the public's perception of their company.

In short, measuring impact is subjective, difficult, expensive, and not typically rewarded financially or increased public good will... But that doesn't mean we shouldn't try to address those barriers.

Dustin Shay
@jake-severn I think that's an interesting question and there are a million and one answers to it. I think the short answer is 'only in moderation.'

Completely financializing core infrastructure is a recipe for an unequal society. We can see what happens when hospitals and healthcare are privatized by looking at what's happening now: they're losing billions, in some cases shutting down, and leaving people without care (https://www.nytimes.com/2020/05/15/us/hospitals-revenue-coronavirus.html?action=click&module=Top%20Stories&pgtype=Homepage). You can also see it in private toll roads. Right now, it's an inconvenience, but if all roads were private toll roads, people on the lower end of the economic spectrum would be unable to travel because they can't pay the fee. It's like that old quote of having to pay to leave your apartment.

By the same token, basic scientific research, if financialized, looks a lot like pharmaceutical research does now: unless the market is big enough, there's no reason to actually go out and conduct research. Some of the biggest accomplishments of our society, things that paved the way for the modern era like space exploration, wouldn't be profitable, wouldn't get funded, and wouldn't happen.

What I believe is that there's a role for business in mitigating big, intractable challenges that are too big or unwieldy for philanthropy, and that lack sufficient political will for government intervention. We shouldn't overweight it, and it shouldn't be applied in all circumstances, but there is definitely a role for it right now.

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